Big Picture Analysis – After Chairman Bernanke hinted in front of the House yesterday that the case for more easing had diminished given macro developments in employment and other areas, equities sold off hard, led interestingly by bonds, the correlation with which has flipped to become positive over the last week. Overnight, more than two thirds of the high to low losses in the ES have been pared, however, and we will look with interest to see if this was merely a one day risk-off event, or the start of a more substantial correction. With regard to the latter, we will be on alert for the potential for a bull trap, where initial strength is reversed hard after the 10:00 am EST news window today, where we have ISM Manufacturing, Bernanke testifying (this time in front of the Senate) and Construction Spending. In the 135 minute chart, below, we’ve split the long-running volume profile in two, to be able to show recent price action in more detail. The break corresponds to the volume gap that occurred on February 3.

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